In Los Angeles, Your Vacation Rental May Be a Rent-Controlled Apartment — ProPublica

The first complaint about illegal vacation rentals at 1940 Carmen Ave., a rent-controlled apartment building just blocks from Hollywood Boulevard, arrived at the Los Angeles Housing Department nearly a decade ago.

“This place is crazy,” a tenant reported in 2015, according to an inspector’s note, “luggage up and down, different people always in and out. Not safe.”

Inspectors cited the owner for changing the building’s use without a permit. They warned him again the next year. But after that, housing inspectors appeared to drop the matter, even as they ordered the owner to correct other building code violations. A few years later, in 2020, a tenant complained that 14 of the 21 units were listed on Airbnb.

LA’s zoning laws have long prohibited turning apartments into hotel rooms, with a few exceptions. But in 2018, the City Council handed inspectors a new enforcement tool, an ordinance that specifically outlawed using rent-controlled dwellings for short-term rentals.

The Housing Department opened a case against 1940 Carmen but referred it to the planning department — even though the planning department doesn’t have the ability to fine or otherwise penalize violators. Planning department officials said they found no evidence of short-term rentals.

However, Booking.com recently listed one-bedroom units in the building for about $160 a night. Asked about short-term rentals, 1940 Carmen owner Alexander Stein said, “I would rather not discuss it. Thank you for calling, though,” before hanging up.

In all, residents and neighbors have made nearly two dozen complaints. The building even found international fame after the singer Mon Laferte told Rolling Stone she named her 2021 album “1940 Carmen” for the Airbnb where she stayed in LA — and was nominated for a Grammy for it.

What happened at 1940 Carmen has played out in dozens of other buildings across Los Angeles. Landlords are using rent-controlled apartments as vacation rentals in apparent violation of the law, an investigation by Capital & Main and ProPublica has found. In some cases, entire apartment buildings with more than 30 units are listed as boutique hotels on sites like Hotels.com and Booking.com.

By analyzing city databases and combing through online listings, the news organizations found 63 rent-controlled buildings where a tourist could book a room this spring. The number is likely far higher because many vacation rental websites like Airbnb don’t list exact addresses.

The findings are “shocking but not surprising,” said City Councilmember Nithya Raman, who is spearheading efforts to tighten home-sharing enforcement. “The enforcement system we have set up in the city of Los Angeles fails to meet the spirit of the ordinance.”

Last year, Capital & Main and ProPublica found similar issues with a smaller category of affordable housing, called residential hotels, which are supposed to be preserved for the poorest Angelenos. But the new reporting on rent-controlled apartments shows the bureaucratic dysfunction in the city’s housing and planning departments runs far deeper.

As with residential hotels, inspection records and complaints obtained under the California Public Records Act revealed that the city’s enforcement system is riddled with inefficiencies and shortcomings.

The enforcement crisis threatens LA’s ability to preserve affordable housing as the city faces a soaring housing market and near-record homelessness. Mayor Karen Bass declared a state of emergency on housing on her first day in office in 2022. About 650,000 units, 70% of the city’s rental inventory, are rent-controlled, meaning building owners can’t raise rents by more than roughly 4% each year until the tenant moves out.

Housing Department spokesperson Sharon Sandow didn’t answer specific questions about enforcement problems and noted that multiple agencies oversee short-term rentals. She said, “We will continue to work with our colleagues to ensure enforcement.” The planning department didn’t respond to questions about the city’s home-sharing enforcement policies and procedures, referring them to the Housing Department.

An Airbnb spokesperson said by email, “there is no place on Airbnb for Hosts who circumvent the City’s Home-Sharing Ordinance, and we will continue to work closely with the City staff to address Hosts who try to evade the rules.” Expedia Group, which owns Hotels.com, said it “evaluates our listings on a regular basis and works with our partners in Los Angeles” to ensure compliance. Booking.com didn’t respond to emails requesting comment.

The buildings range from the small 1920s-style Rosemary Speakeasy, featuring a $288-a-night tower apartment with a winding staircase and a jacuzzi-style tub, to the the Venice V Hotel on the famous beach boardwalk, which for $600 a night offers panoramic views from penthouse suites named for silent-film stars, like Charlie Chaplin, who once lived in the building, then known as the Venice Waldorf. Guests, the hotel’s website says, can even see the ocean from the shower.

Venice V owner Carl Lambert said he’s done nothing wrong by converting the building. “Everyone has been treated fairly,” Lambert said. “I comply with the law.” The Rosemary owner Izzy Kerian said his is a commercial building and denied knowledge of its rent-controlled status. “Too many questions, ma’am,” Kerian said. “I don’t understand anything. I’m just the business owner.”

The unchecked conversions come as “home sharing,” in which residents rent out their houses, spare bedrooms and apartments as hotel rooms, has boomed across the world over the past decade. That has left cities from Dallas to Vienna to Tokyo struggling to craft regulations to keep the $100 billion industry from devouring the local housing supply. Several academic studies have found short-term rentals drive up rents for residents, fueling the push for stronger regulation.

Elected officials in LA are considering how to strengthen its rules. The timing is important, housing activists say, as the city prepares to host the 2026 World Cup and the 2028 Olympics — each of which is expected to bring hundreds of thousands of visitors to the city.

A Tangled Enforcement System

Since the home-sharing ordinance passed, the Housing Department has heralded it as a powerful tool that would stop rogue hotel operators from eating up rental units. The law prohibits unregistered properties from advertising, and owners can be fined $586 per violation and up to $5,869 for repeat violations. Vacation rental websites can also be fined for listings that violate the ordinance.

Recent enforcement has persuaded some property owners to return their buildings to residential use, Sandow said. In 2022, the city settled a lawsuit against Vrbo, accusing it of processing thousands of illegal bookings, for $150,000. A spokesperson for Vrbo’s owner, Expedia, said the company is working “to help drive a high rate of compliance with local laws.”

But the LA planning department told the City Council last year that administrative citations won’t deter apartment owners who turn entire buildings into de facto hotels. Instead, it argued, legal action must be taken against property owners or managers who do so.

The city “is either unable or unwilling to actually enforce” the ordinance, said Nancy Hanna, an attorney for Better Neighbors LA, a home-sharing watchdog group. (Hanna works for a law firm that is a financial supporter of Capital & Main.)

The planning department has an automated system that crawls the internet, scanning listings to flag potentially ineligible properties when their owners apply for permission to post their homes on Airbnb or other websites.

Granicus, the contractor that runs the system, will have received $6.3 million over six years when its current contract expires in 2025. The company has sent out more than 18,400 warning letters to potential violators for listing rentals without registration. But the planning department said that’s too many cases for city staff to handle, so it rarely follows up.

Instead, agency officials told a City Council committee that they rely only on constituent or council complaints to detect violators.

Indeed, many of the buildings found by Capital & Main and ProPublica had received computer-generated warning letters, meaning the city had a chance to stop their short-term rentals. But few were cited.

The city is also missing another opportunity to catch potential violators. The LA Office of Finance maintains a list of hotel businesses in the city so that it can collect its 14% bed tax. Using this list, Capital & Main and ProPublica found more than 100 additional rent-controlled buildings where owners or residents had registered to operate hotel rooms.

Those buildings have thousands of apartments, but there doesn’t appear to be a system to flag rent-controlled properties on this list. Not all are actively operating as short-term rentals, according to interviews with people on the list. It’s unclear how many do so, as the agency wouldn’t disclose which businesses had recently paid hotel taxes, and because many vacation rental websites mask their listings’ locations.

Meg Wynne, a finance office spokesperson, said her agency is “not a regulatory authority” and doesn’t have the power to determine whether people applying for hotel tax certificates “are legally allowed to perform that activity.”

Even when the housing and planning departments have heard repeated complaints about the same property, like 1940 Carmen, owners escaped enforcement, thanks in part to a convoluted system in which cases must pass through multiple departments.

One record provided by Better Neighbors LA shows that even city employees are sometimes confused. The planning department’s complaint line registered a 2020 call from a woman who identified herself as a Housing Department employee. “She would like to know how the process works so she can inform tenants as well,” a call log reads.

Inspection records show that in several cases, the Housing Department found online ads or in-person evidence of short-term rentals but didn’t enforce the ordinance. In other cases, inspectors failed to cite building owners who told them outright that they were running hotels.

Even when inspectors do cite building owners, enforcing the law is slow. One reason it takes so long is that there haven’t been enough hearing officers to handle appeals.

At a housing and homelessness committee hearing last fall, city planner Lance Sierra told the group that once a citation has been issued, it “takes between two to three years to complete.”

The chairperson, Raman, was incredulous. “Two to three years …?” she asked.

Some owners have used the long delays and bureaucratic confusion to their advantage. Many have ignored the city’s letters warning them to stop short-term rentals. Others advertise tourist rooms while their appeals are pending, or even after paying fines, with no repercussions.

The Fight Over the Venice V

Nowhere is the home-sharing problem more acute than Venice Beach, once an ethnically and economically diverse haven for bohemians and struggling artists where rents were cheap. Now, part of LA’s Silicon Beach — Snapchat was based there in the 2010s — Venice has more home-sharing registrations than any other community in the city, and housing costs have skyrocketed.

James Adams, who grew up there, blamed short-stay rentals for his family’s housing issues.

“We live on top of each other,” he said, opening the door to a bright one-bedroom apartment a block from the ocean that he shares with his wife and their two daughters, 3 and 7.

The living situation works for now because the kids are little enough to share beds with their parents, Adams said. The couple, both teachers, can barely afford the $3,000 monthly rent, but he said he wants to stay in Venice as long as he can.

That’s become increasingly difficult because of the conversion of buildings like the Venice V.

When its owner, Lambert, purchased the Venice Waldorf in 2015, it was among a handful of rent-controlled beachfront apartments still affordable to students, retirees and middle-income workers. But over a few years, he bought out nearly all of the former tenants, transforming it into a hotel.

When the renovated Venice V opened, in 2021, Condé Nast Traveler gushed about how guests can “relax in a plush king size bed and watch the sailboats breeze by outside the window, and stargaze through the vintage style standing telescope at night.”

Local activists were less enthusiastic. “Owner is a serial violator of illegal conversion of rent stabilized apartments to illegal hotels in Venice,” read a 2021 complaint to the Housing Department — one of 18 against the Venice V since 2014 related to short-term rentals or construction without permits, housing files show. Lambert had been cited by the city for other conversions in Venice, but in two cases a city agency or court ruled in his favor.

Before the home-sharing ordinance, some short-term rentals had been allowed at the building. But by 2020, when Lambert’s construction supervisor told an inspector that all but two rooms would be turned into hotel accommodations, they were not.

Lambert has become the target of residents’ ire over the community’s dwindling housing supply. “I’m the whipping boy,” he said. “All the vim and vinegar from a small group is leveled against me.” Lambert wouldn’t answer specific questions about his properties, saying, “I don’t want to be the subject of a witch hunt.”

In 2021, the Housing Department fined Lambert $4,000 for eight violations of the home-sharing ordinance at the Venice V. Lambert appealed, and two years later, his attorney demanded the city rescind the fines, arguing the home-sharing ordinance didn’t apply and contending the city had unfairly singled Lambert out for enforcement.

Lambert’s appeal has still not been heard. But last year, the fines were “withdrawn pending further investigation,” according to a Housing Department email obtained through a public records request. Sandow, citing the probe, wouldn’t say why the citations were withdrawn or what was being investigated.

Still, in a separate case, Lambert won city approval last year to expand the hotel with a restaurant and theater space. In a lengthy decision, a zoning administrator concluded that the building’s short-term rentals were illegal. But he tossed the issue out as irrelevant, saying that his job was to focus only on whether the restaurant and theater were appropriate uses.

At an appeal hearing in March, Lambert predicted that he’d not only win but that the city would eventually come down on his side on the short-term rentals.

“It’s LA,” Lambert said. “And they have wrong opinions at times. Finally, as it goes up the chain, you get an affirmative answer.”

After five hours of testimony and deliberation, he got the answer he wanted on the restaurant and theater.

The City Council is expected to vote on recommendations to tighten the home-sharing ordinance later this year. The ideas include allowing individuals to sue violators, creating a home-sharing enforcement team made up of staff from different city departments and offering residents rewards for reporting neighbors who violate the ordinance.

“I think you have to make it so that if you violate the law, you are very likely to get a penalty,” Raman said. “Unless we do that, we are going to see continued flouting of the laws — because flouting of the laws is very, very lucrative.”